Angola to cap forex outflows to buoy ailing economy

Foreign investors in Angola face new restrictions on the amount of hard currency they can repatriate, the central bank governor said, as regulators seek to prop up an economy weakened by a sharp drop in crude prices.
Under new laws made public late on August 17, foreign firms investing in strategic sectors, which exclude the country’s dominant oil industry, will also have to sign up a local partner.
Africa’s second largest crude producer is struggling to prop up its economy after a halving of oil prices last year sapped dollar inflows, dented the local currency, hammered public finances and prompted huge government borrowing.
Angola’s central bank devalued the kwanza by 6 percent in June, taking the currency’s losses against the dollar to around 23 percent this year. Economists believe currency weakness will trigger another devaluation in coming months.
The new Private Investment Law was passed by Angola’s parliament on August, 11 but details were previously not made public.
‘A significant part of private investment has become a major drain, with foreign currency going abroad,’ Governor Jose Pedro de Morais told reporters. ‘This new law will correct this.’
De Morais had earlier told state television that companies operating in Angola and citizens should reduce their ‘foreign currency needs’ by 50 percent. It was not clear if this was part of the new investment law.
The new law will require foreign companies to run operations from an Angolan bank, de Morais said, a measure experts believe is aimed at monitoring firms who regularly report losses, meaning they don’t have to pay taxes.
Investors in ‘strategic sectors’, including telecoms, electricity, construction, water, technology and transportation, will need to give a local partner at least a 35 percent share in the business, the legislation also states.
Foreign oil majors, including Exxon Mobil, Chevron, BP, Total and Eni all have large operations in Angola. Portugal, once the colonial ruler in Angola, also plays a major role in the economy.
Standard & Poor’s lowered its credit outlook on Angola to negative last week, indicating it may cut its credit rating on sub-Saharan Africa’s third largest economy if things do not improve.